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Traditionally, accounting is divided into two subsystems financial and managerial accounting. This separation is due to the difference in goals and objectives, solved in the interests of external and internal users of information (Ashar, 2019). The managerial accounting system forms information necessary for internal analytical and control purposes; this information is not regulated by law. Management of the enterprise independently determines the management objects, accounting methods, and forms of reporting (Hilton & Platt, 2019).
Because management accounting is not regulated to the same extent as financial accounting, some ethical problems can occur. They are connected with the opportunity to hide some financial information or distort it. Management accounting activities are more difficult to control; therefore, it is almost impossible for an employer to monitor all of an accountants actions, and there is a high probability that some of those actions go against the interests of the company. Moreover, specialists might conceal or distort information about a companys deteriorating performance. Therefore, specific requirements on reporting, such as a united accounting format and financial reporting, should exist to avoid data falsification and acting in ones interests.
Another important ethical issue is competence, which an accountant needs to improve constantly. The legislation makes frequent changes in the financial sector. Without knowing them, the accountant risks committing illegal actions and leading the company to unfortunate consequences. In managerial accounting, it is important to express competence not only in the area of legislation but also in the area of highly specialized skills. Thus, in order to do their job more effectively, accountants need to keep up with technology and software developments in their industry. Organizational capacity and productivity rely on the precise order of actions, and therefore, there is a need for specific regulations which might facilitate better outcomes. All of the above ethical issues should be regulated by internal rules and reporting, as they significantly affect the companys efficiency.
References
Ashar, K. (2019). Financial accounting essentials you always wanted to know (4th ed.). Vibrant Publishers.
Hilton, R., & Platt, D. (2019). Managerial accounting: Creating value in a dynamic business environment (12th ed.). McGraw-Hill Education.
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